The Stimulus Worked?, Ctd

"Worked" is an interesting word. Simply citing employment and GDP data
as evidence that a public policy "worked" implies that there is no
cost-benefit analysis -- that infinite spending and debt can be
considered to have "worked" if some threshold levels of employment and
GDP are achieved. But a look at what those jobs and what that
additional increment of GDP cost us -- or more precisely, cost future
generations -- reveals a different story.

According to Recovery.gov, $234.2 billion of the stimulus
money has been spent. Assuming CBO's jobs estimates are correct, that
means that each job cost somewhere between $146,000 and $390,000. Does
spending almost $400,000 to save a job sound like a policy that
"worked"? Not to me. And on the GDP numbers, 1.2% to 3.2% translates
into a range of $170 billion to $453 billion of additional GDP. Given
$234.2 billion in costs, that suggests a multiplier of between 0.73 and
1.94. So it's not even clear that we've achieved a break-even
multiplier of 1.

Another reader:

Based on that report, the CBO does not like tax cuts or bribing seniors as stimulus.

Check out the table on page 12 and 13 of the PDF. The CBO itemizes the
low and high estimates of output multipliers--cumulative impact on real
gross domestic product over several quarters for each dollar of
spending or reduction in tax revenues--for various ARRA "activities".
The CBO liked when the ARRA called for the federal government to buy
stuff or provide services (low: 1.0, high: 2.5). They also liked when
the federal government provided cash for infrastructure (1.0, 2.5).

Tax cuts? Notsomuch. The one year tax cut for higher-income people
(.1, .5) and provisions for corporate cash flow ledger trickery were
the worst (0, .4). The first-time homeowner credit? Nope (.1, .5).

And bribing seniors? Sorry (.2, 1.2).

The CBO report is the ARRA's estimated impact as of September 2009 so
there's some time to go for some of those underperformers. The
corporate cash flow ledger tricks may actually payoff later. The rest
of the tax cuts and senior bribes are likely to fizzle as their effects
were temporary or will end in a year or so.

Still, not good for cheerleaders of the homeowner tax credit or anyone who may call for more tax cuts in a possible second stimulus or jobs program.

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